How Restaurants Can Fight Rising Labor Costs

According to a new study in the Journal of Hospitality & Tourism Research, the economic impact of the coronavirus pandemic may force many restaurant owners to automate their workforce in order to combat rising labor, product, and real estate costs. The study revealed this sentiment cuts across all restaurant categories but is especially true of quick-service restaurants, the industry’s fastest-growing concept.

Part of the reason business owners are jumping to introduce robots into their operations is that the pandemic severely disrupted product supply lines. This disruption led to price hikes on many products, costs that were hard to offset by closed or limited restaurants.

Another reason is that several states plan to increase their minimum wage this year, putting additional pressure on small businesses to pay their workers a living wage. States like Colorado, California, and New York have plans in place to increase their minimum wages to $15 per hour in the near future. Coupled with local dine-in restrictions, many restaurant owners don’t see another option, they must cut costs and labor is a major one.

Leaving the discussion about the societal impacts of robot service in restaurants aside, there are several ways restaurants can absorb or defray rising labor costs without cutting humans out of their operations. This article will explore a few of those ways.

Go Green and Cut Energy Consumption

Restaurants HVAC systems are notorious polluters. A recent study by Carnegie Mellon University’s Center for Atmospheric Studies (CAPS) found these systems “are a major, if not the major, driver of spatial variability of organic aerosol [pollution].” Organic aerosols contribute to global warming by trapping heat underneath the atmosphere.

Upgrading your restaurant’s HVAC system is not only good for the environment, but it can also decrease energy usage costs. These savings can help defray rising labor costs, thereby allowing a business to keep more staff employed.

When deciding whether to repair or replace your HVAC system, consult the Energy Star guidelines from the EPA. They offer several recommendations that can help business owners reduce their energy usage.

Increase Retention

If a restaurant’s budget were a pie, labor would be the largest slice. On top of that, turnover costs associated with training and lost productivity make it important for restaurants to focus on retaining employees to avoid having to automate.

The National Restaurant Association found that the turnover rate is increasing across the industry, landing just under 75% in 2019. This resulted in approximately $150,000 per restaurant in lost revenue.

One way to retain employees is to offer benefits they won’t find elsewhere. Most restaurants offer some form of medical benefits, but not all offer management training programs.

Another way to retain employees is to focus on building an inclusive company culture. Hold events and celebrate the hard work of your employees from time to time. Taking the time to show how much you appreciate them is almost as good as adding additional monies onto an employee’s paycheck. A little respect goes a long way.

Focus on Cross-Training and Skill Development

Retaining employees also means investing in training them on new skills. Cross-training is one of the most effective ways to ensure your staff members become indispensable elements of your business.

For example, training a bartender to run food can lighten the load on your front of house staff when they are busy. The same is true of training your dishwasher to handle some kitchen tasks. No matter how simple the task is, having more than one knowledgeable employee who can accomplish it makes processes run smoother and keeps employees meaningfully engaged.

Focus on Scheduling

One of the most overlooked aspects of managing a restaurant is the business’ labor report. Many business owners think that just because they have staff on the floor at any given time, they are therefore appropriately staffed. This is a myth that needs to be dispelled immediately.

The most powerful tool a manager can use when writing a schedule is data. Staff your business based on when you see the most customers, not when you need someone to cover your breaks. Having accurate labor projections will go a long way to decreasing unnecessary costs.

Raise Prices

When push comes to shove and your restaurant still needs to increase revenue, raising prices is one of the best ways to do it. It’s one that many restaurant owners find unsavory, but it’s a better option than closing your doors for good.

This solution is also one that a growing contingency of customers is supporting. In a recent survey by Eater Atlanta found customers are tipping more because they know restaurant workers desperately need the income. They also found that customers don’t mind paying more for a meal if it means keeping a local establishment in business.

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